Suppose That the Duopolists Carl and Simon Face a Demand

question 1

Multiple Choice

Suppose that the duopolists Carl and Simon face a demand function for pumpkins of Q = 16,800 - 800P, where Q is the total number of pumpkins that reach the market and P is the price of pumpkins.Suppose further that each farmer has a constant marginal cost of $1 for each pumpkin produced.If Carl believes that Simon is going to produce Q_s pumpkins this year, then the reaction function tells us how many pumpkins Carl should produce in order to maximize his profits.Carl's reaction function is R_C (Q_s) =

• A)16,800 - 800Q_s.
• B)4,000 - Q_s/2.
• C)8,000 - Q_s/2.
• D)16,800 - 1,600Q_s.
• E)12,000 - Q_s.

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Definitions:

Average Total Costs

The total costs (fixed and variable) of production divided by the quantity of output produced.

Average Fixed Costs

The total fixed costs divided by the quantity of output produced, indicating the cost per unit that does not change with output level.

Average Total Costs

The cost of producing each unit, calculated by dividing the entire production cost by the total number of units made.

Marginal Cost

The increase in cost that arises from producing one additional unit of a good or service.